This is a story about a young lady who had really great potential when I first met her. Her story started out quite differently than it ended.
There are some people who seek help and advice but are unable to stay focused on their goals and plans. Well, Karen was one of those people. She completely changed her plan because of a friend’s investment suggestion. Unfortunately, Karen was not ready and not financially prepared for such a big investment. Karen will suffer for years as a result of this poorly planned financial move.
I began working with Karen in 2006. She was introduced to me by one of my other clients. I initially met with Karen for about two hours once a week. Karen was earning an income of $34,000 and was still living at home. Her total debt was about $2500 with total monthly expenses of $1,136. Karen did not have any savings and spent what was left of her pay throughout the month and often found herself short of funds till the next pay period
Karen’s short term goal was to pay off her bedroom set which was bought on NO PAYMENT FOR 15 MONTHS. We started a special account to have this paid in 13 months and really pay no interest. Her other short term goals were to save for a lap top computer and a vacation within one year. Her long term goal was to save to purchase her home in 5 years. Once Karen’s plans were in place we met only monthly for awhile.
Ten months into the plan I got a call from Karen that her friend just introduced her to a real-estate broker and that Karen and her boyfriend had bought a house. Needless to say I was quite shocked. I contacted Karen and asked her to visit me and bring all the papers she had about the purchase. I knew she was not financially prepared to buy a house.
I never saw or heard from Karen again.
In 2009 I heard that Karen and her boyfriend were breaking up. They tried to sell the house but were unable to unless they came up with $30,000 to pay the builder as per the contract, otherwise, they needed to stay in the home for 5 years before selling it on the open market. Since neither of them were able to come up with the cash they are now locked into a situation where neither of them wants to be in. They are facing many years of turmoil and financial uncertainty.
At the time of the house purchase, Karen was simply not ready and her boyfriend was only working on commission. The boyfriend had no savings and he was not involved in the financial planning process. But, they bought the house because it seemed to be an offer that was too good to be true. It was!
Karen decided to change her plans years before she was ready, making decisions that were not well thought through. She was trying to keep up with her friend, who may have been planning for a much longer period and was ready to make her purchase.
I urge my clients to remember that the situation that suits your friend or family does not necessarily suit you and may not be the best for you. If you have set goals, with time frames it is advisable that you stay on your plan or rework your goals as your needs changes while seeking the advice of your Financial Advisor or another professional who is trained in helping you make the right decisions.
Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com/